TOTAL LICENSING
federacy ceased to function. of San Francisco, where so many internet re- nesses, but they were
• 1922 – 1924 - German and Austrian Hyper- lated, technical innovations were born. Many certainly in love with
Inflation, which left us with pictures of citizens young graduates from schools that were teach- their own dreams,
rushing to the grocer in the morning with ing them math and the computer science of and some later went
wheelbarrows and shopping baskets full of 100 the day were stimulated by the great idea that down with their com-
million mark notes for fear that by the evening instead of selling things via what later came to panies because they
these banknotes would only be worth half as be called “brick-and-mortar stores”; one did not could not fathom
much. need a store at all! One could sell products or the collapse of the
• 1984 – The smaller cousins of the major services via the internet at comparatively mini- dream. The internet
commercial banks, the Savings and Loans (S&L) mal cost providing, of course, that one could ac- chat rooms were full
banks, could not ignore the high profits made by cess the consumer by advertising or promotion, with the latest news on who did what. Later, in
the commercial banks. They began to finance so that they would “hit” your website and use it those very chat rooms, it was discovered that
everything that could be financed: hedge funds, to acquire what the website offered them. The the dot-com’s were running out of money and
commodities, bonds, mortgages, etc. In their ap- theory went further by postulating that all this practically all of them had never made any, and
petite they ingested more than was good for could be done for free, providing that one could had burnt through their initial investments or
them. When Franklin Savings Bank in New York build a large user list, which then in turn could subsequent cash infusions. The tide turned and
and Lincoln Savings and Loans (Charles Keat- be sold to others, traded, exchanged, or eventu- in a horrible roller-coaster slide dot-coms’ lost
ing) collapsed because they did not have enough ally used for advertising, or even rented out to favor. Everyone tried to sell, and again the crisis
capital to withstand a 1984 stock market and brick-and-mortar retailers. fed on itself and left a great deal of losses and
real estate crisis, the disease spread and the Wherever a few young people that were knowl- unhappiness behind.
Federal Home Loan bank board had to order edgeable in this, then little known, science got The big Wall Street firms, who had first had
the closure of these banks. Although there had together they would found companies. To get sneered at this new business, and later stumbled
been some fraudulent land investment schemes, the money for their activities they could turn all over themselves to partake of the spoils,
most of them really were almost innocent vic- to venture capitalists, many of whom smelled a washed their hands of the whole affair and sold
tims of a downturn for which they were not good thing. This was a chance to go public, have out everything as quickly as they could. End of
prepared. A government body, the Resolution a spectacular rise in the stock market for their story!
Trust Corporation, was set up by Congress at shares, and cash out later after legitimacy for the • 1998 was a specially horrendous year:
an eventual cost to the government (between enterprise was won. More and more speculative investments prom-
1986 and 1995) that amounted to $153 billion If one ran out of cash one could make a second- ised large returns and financial success.
due to their taking over the 500 nearly bankrupt ary offering and sell more shares. Actually, one There were the investments of globalization
S&L’s to protect their innocent S&L investors. It did not have to be able to prove that one could that had become popular with its bonds and
might be worthwhile to comment that actually, make money. One only had to prove that one overseas stocks in exotic economies that could
over the long stretch, the government did not had a very unusual or promising idea. Whereas rise by unheard of percentages.
do too badly in this transaction. Its Resolution we still know some companies that succeeded Do you remember the rise and fall of the “Little
Trust Corporation slowly cleaned up the mess over the long run (Amazon, Dell, Yahoo), many Tigers”? The nations of Thailand, Indonesia, the
and made back practically all of the money it of them have since disappeared. Most of the Philippines, Malaysia, and South Korea had suc-
had invested. stock brokers, or even venture capitalists, did ceeded in building unbelievable commercial suc-
• 1987 – After Futures trading started in vol- not really understand all of this new science, cess based on hard work and cheap labor, real
ume in 1982, it became practice that futures but they did buy into the hype - and the hype estate expansion, and exports. It was fashion-
could be bought on margin requiring only a sounded so exciting and interesting! able to play in the overseas markets with invest-
small down payment with the rest of the future Newly issued shares rose. Some of them in- ments, stocks, bonds, or whatever one could
owned on credit by the purchaser. creased with a price rise that went from 10 get. Investment funds forgot to be cautious. It
An unanticipated crash of the stock market re- times to even 100 times of initial issue price was simply too nice to make such high returns.
duced the value of the stocks causing worried on the NASDAQ. Some stocks changed hands When, through easy credit and over-expansion,
brokers to tell their clients: “Bring more cash many times on the way up. For instance, Pur- the entrepreneurs in these countries had run
or we will have to sell your stock for whatever chasePro, a purchasing site for businesses, had ahead of themselves, Thailand, as the first, sud-
we can get.” The computers of the day could an $8 offering price and rose by 2,000% up to denly collapsed and its currency collapsed with
not keep step. On “Black Friday” the Solomon $175 (including a split). At one point in 2000 it. When the IMF (International Money Fund)
brothers unloaded option contracts at the rate there were 371 publicly traded internet com- entered the scene to help, their prescriptions
of 1,000 at a time and on Monday thousands panies that were collectively valued at $1.3 tril- for credit contraction, conservative manage-
of stock owners woke up to find their shares lion – 8% of the value of the entire U.S. stock ment, increased taxes and decreased spending
sold off in exchange for the more and more di- market. There were so many names that you did not work, but made the crisis worse. The
minished cash that was left over in the brokers’ would probably not recognize today. I will give blush came off the rose and took eight years
account. As it progressed, the crisis fed on itself you only the last three of the alphabet simply to to cure.
and made values drop ever further. tickle your memory:
Yesmail.com,
ZapMe.com, On the other side of the globe, Russia, which
• 1995 – Do you remember the dot-com rev-
Ziplink.com. had emerged from the Soviet Union into private
olution? Unfortunately, many of the CEOs of these investments via crony capitalism under Yeltsin,
It was in Silicon Valley, that idyllic suburb south companies were inexperienced in running busi- grew exponentially with the expansion of its
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